HP Cloud Chief: We’re Not “Intimidated” By Amazon’s Cloud

While the cloud market is still relatively new, all signs suggest that Amazon Web Services (AWS) is going to continue running away with the market. Not only does AWS dominate market share, but it also stands to continue to gain from “relentless economies of scale,” as Redmonk analyst Stephen O’Grady terms it:

The economies of scale that larger players can bring to bear on the markets they target are, quite frankly, daunting. Their variable costs decrease due to their ability to purchase in larger quantities; their fixed costs are amortized over a higher volume customer base; their relative efficiency can increase as scale drives automation and improved processes; their ability to attract and retain talent increases in proportion to the difficulty of the technical challenges imposed; and so on.

While AWS, Google and Microsoft are the primary beneficiaries of this gift of scale that keeps giving, HP also benefits: “Those that would compete with Amazon, Google, Microsoft et al, meanwhile, or even HP or IBM’s offerings in the space, will find themselves faced with increasingly higher costs relative to larger competition.”

As comforting as this may feel to HP or IBM to be lumped in with the mega cloud vendors, the reality is that they simply can’t compete on scale. So how do they compete?

Fight Or Flight?

O’Grady offers a hint as to how these smaller clouds can compete, holding that they “must differentiate themselves quickly and clearly, offering something larger, more cost-competitive players are either unable or unwilling to.” Some, like Digital Ocean, do that through a rabid focus on developer convenience.

HP, for its part, has other plans.

The way HP’s cloud chief Marten Mickos—the former CEO of Eucalyptus (acquired by HP) and MySQL (acquired by Sun)—sees it, there are at least three reactions to a behemoth like AWS: fight, flee or make the most of it.

As Mickos tells it, “Microsoft, Google, Alibaba and IBM are choosing to fight. They position themselves head-to-head against AWS, claiming that their service is superior.”

Microsoft, in particular, has found success in this strategy, even as Google has struggled, as a new Piper Jaffray CIO poll suggests, with Google named as the preferred cloud vendor just 7% of the time (a fall from 12% last year). AWS, meanwhile, climbed to 35% (from 33%) while Microsoft moved to 21% (from 20%) and Rackspace hit 16% (up from 15%).

In other words, scale is necessary but not sufficient for those choosing to “fight.”

For those choosing the “flee” option, well, they’re increasingly irrelevant as they carve out niches in datacenters.

Making The Most Of Cloudy Opportunities

But for those that “decide to make the most of it,” Mickos argues that those that manage to “observe AWS very attentively and make sure they understand how it is working—not just from a technical perspective but also from a user experience perspective and an economic perspective,” stand a chance of succeeding.

With regard to HP, specifically, he points out:

HP, as an example, offers a full deployment range: private cloud, managed cloud, and public cloud. HP also offers AWS compatibility. No one else does that. I think the key is to not be intimidated by AWS, because if you let that happen, you must flee or fight. If you can calmly observe and accept the situation as it is, you will also find amazing business opportunities that AWS and others are not pursuing (and often are not able to pursue).

In short, though the initial battle has clearly been won by Amazon, it’s equally clear that the long-term war is far from over. Microsoft has demonstrated this by giving its CIO friends an easy on-ramp to the public cloud. HP, for its part, is piggybacking on AWS success, in part, with full compatibility.

For those enterprises that want the best of public and private clouds but don’t want to go to Microsoft, HP looks like a tasty option. Whether CIOs will bite remains to be seen, but at least it’s now clear the market is still worth watching.